News

NEW YEAR RESOLUTIONS TO FIX YOUR FINANCES

Last month I sent along a list of some of my top suggestions for saving on taxes before the ball dropped in NYC.  This month, I’m looking ahead on your behalf and sending along some of the best New Year’s Resolutions I have found for jump-starting your income for 2013.  There are a million ideas out there yet these seem to be simple steps to achieve financial success.

Resolution # 1  Get Fit

It’s a world-wide resolution every January 1: Time to get fit.  Yet in this particular case, I’m talking about taking a good look at the shape of your finances. Are you spending more than you’re bringing home?  If so, time for a check-up.  In an effort to keep things simple, I suggest you make this easy on yourself and create a spending log and document every penny that goes out of your pocket for the first two months of the year. This will give you a real good birds-eye-view of what you need to do to maintain a healthy financial balance for the balance of the year.

Resolution # 2  Take Simple Steps to Save

If you’re spending more than what you’re bringing home, you’re not alone.  At this point you have two options:  reduce your expenses on the items that you can truly live without (even if it’s just for a month or so) or find an additional avenue for increasing your income.  Let’s take the first option: cutting back on simple pleasures. You don’t have to approach this concept at a level that will keep you from a good night’s rest.  Take small steps.  Maybe you don’t really need that extra latte everyday or fresh flowers for the weekend.  Perhaps you can live without a few extra beers at the local brewery every Monday night.  You’ll be surprised at how simple pleasures like these can make a substantial difference in your spending patterns; so readjust a bit and I bet you’ll be amazed at the extra cash that will come your way.

Resolution # 3 Expand Your Income Horizon

I am not suggesting you get two jobs or become involved in multi-level marketing programs.  What I am suggesting is that you look around to see if you have a skill that others may need?  Are you a handy-man?  Enjoy woodworking?  Do you love to cook?  As the economy has started to truly challenge all of us, it has fueled a whole new revolution for entrepreneurs.  It’s not uncommon for men and women to promote their ‘other talents’ while networking with friends, family and acquaintances.  Don’t be shy; strut your talents and you make be surprised to hear that someone will pay you for what you love to do best.

Resolution #4  Follow The “Best Buy” Craze

So it takes a little work – yet the end result is worth the effort.  The world of technology has spurred a huge surge in the “battle of the bonuses buys and coupon cash” craze that marketing pros are using 24/7 to get you to their online stores.  Before you make an important purchase – be it a new car, new coat or new set of tools; do your homework.  Use those search engines and key in the words “Best Deals”, “Best Buys”, before the name of the item that you have in mind.  I know for a fact that these deals are there for you to abuse so get savvy and save!

Resolution # 5  Face Up To Your Finances

Saving money, or finding new ways to make money, can be difficult topics to talk about yet the more you talk about it, the more it becomes instilled in your mind and daily life.  When you keep your New Year’s Resolution in front of you, you will be surprised how it can become a subliminal culture that you’ll want to keep for years to come.  So be brave.  Look at your finances in the face and move forward to healthier new you this year, and in years to come.

Need Help Resolving your Financial Challenges?

That’s what we do best.  Call Mark Robertson, your CPA Consulting and Tax Service Professional, at 775-825-5522.

 

MONEY SAVING TAX TIPS FOR THE HOLIDAY SEASON

With the clock ticking toward the end of the year, it’s time to move full steam ahead to put a few more pennies in your piggy bank and wrap up some savings before the clock hits mid-night on December 31st.  Here are some of the easiest tips to get you started.

Tip # 1 General Contributions and Donations

I hit this subject hard in my last Enews to you yet in case you missed it, here’s a synopsis: You can make as many donations as you’d like yet when it comes down to how much you will actually be able to deduct, the rules tell us you can deduct donations in full up to 50% of your adjusted gross income.  You can read the whole story here.

Tip # 2             Contribute to your HSA

If you happen to be a candidate for this option, you have the opportunity now, before December 31, to maximize the contributions that are allowed within your own HSA plan.  This is a great way to stash some non-taxed cash into your account that will be available for you to use as needed next year, and in years to come.

Tip # 3 Ditto for your IRAs and 401K

Every good tax advisor should tell his/her clients about this strategy which allows you the opportunity to contribute to your 401K through your company’s payroll system.   And don’t forget about the ability to convert your IRA to a Roth IRA before the ball drops in NYC. Another option, you can also use your IRA for a Qualified Charitable Distribution to your favorite non-profit.

Tip #4  Pay your 2013 January Bills Now

If you have the financial ability to do so, now is the time to pay your mortgage and property taxes for the month of January, and beyond. As long as your check or on-line transfer is dated before the end of the year, you can use these monies as a tax deduction for 2012.

Tip #5  Ditch the Blanket, Save the Planet

I am not actually suggesting that you crank the heat in the house, yet I am suggesting that you look into making your abode more energy efficient.  Every time I research this subject, it seems like there are more options to help you save money while you help the environment.  This concept behind this is called “Residential Energy Credits” and with a little research, you will probably be able to get a tax credit for new exterior windows, insulation, roofing materials, water heaters and much more.

Tip # 6 Hang up the Mistletoe

If someone in your household has asked Santa for a new Washer and Dryer, or Refrigerator, now is the time to do some serious holiday shopping.  I have seen Energy Credits offered at a variety of levels so do your homework, wrap a ribbon around the gift, and have a holly jolly celebration under the Mistletoe.

Want More Tips?

Contact Mark Robertson, your CPA Consulting and Tax Service Professional, at 775-825-5522.

To Give or Not to Give this Holiday Season

With a chill in the air and holiday décor taking over every big box store, you have to know ‘tis the season for giving”.  As a Reno tax advisor, I am often asked about the benefits of donating to a good cause.  Sure it feels good yet is there a balance between to little or too much?  It depends.  The IRS has become much more rigorous about donations so I thought I’d give you a little bit of insight to help you through the ‘season of giving’

1)    Timing First of all, if your level of donations is slim to none in year 2012, it’s probably time to get jolly and make sure your donations are documented (i.e. received by the organization) before December 31st – and not posted any day after in order to claim your gifts this year.

2)    Qualification  Well-organized non-profits usually fall under the umbrella of a ‘qualified’ organization where your donation can indeed be a write-off; all you need to do is ask to see their 501 (c) (3) designation and you’re good to go.  Be sure to get a receipt.

3)    Too little or too much?  You can make as many donations as you’d like yet when it comes down to how much you will actually be able to deduct, the rules tell us you can deduct donations in full up to 50% of your adjusted gross income.

4)    Planes, trains and automobiles:  Perhaps you’d rather donate your old favorite Mustang that has great memories yet is taking up too much space in the garage?  Or a boat that you’ve lost your passion to float?  You’re better off selling it on E-bay as car donations (and other toys) are under too many radars with regard to maintenance, accident history, etc.

5)    Sweat equity: Don’t lose the spirit to chip in to help those who need it most regardless of what I am going to tell you. Inasmuch as one would think you could deduct your hourly time for your hard given labor, you can’t.  You can, however deduct expenses for mileage and out of pocket cash.

We know that preparing your own income tax return can be a task that leaves you with more questions than answers.  Whether we like it or not, today’s tax laws are so complicated that filing a relatively simple state tax return or federal tax return in an effort to get your tax refund can be confusing. So leave the stress to us.  Contact Mark Robertson for all of your questions during this season of giving, and all year-round.

The Characteristics CPA’s and Finances Have In Common

Do you remember how you chose your CPA?  What characteristics you were looking for?  Do you know as much about your CPA as you do your finances, or is it the reverse and you know more about your CPA than you do your finances?  Well, believe it or not your CPA, accounting information, and your resulting financial reports have significant commonalities.  Let’s start by defining each component.

First, we have the definition of accounting as the assembling of a company’s financial transactions.  The information is required to be based on qualitative characteristics that are reliable and free from bias or opinions from the major company stakeholders and the professional accountant (CPA).  This then becomes the information on which stakeholders in the company make viable business decisions.

Secondly, the accounting information must be relevant.  Simply stated this means that all information must meet the criteria of being current and timely.  Outdated information is useless and would only lend itself to misleading stakeholder decision making.

Next, accounting information requires consistency.  Consistency is the cornerstone to visibility of a company’s accounting practices; whether it is in how accounting information is gathered, where it is gathered from, and how it is maintained.  These practices retain consistency through a natural occurring cycle of repetitiveness.

Lastly, we have reached accounting information comparability.  This is the ability to compare one company’s accounting information to another company’s information. This is achieved through how a company presents its information on reports and statement.  This helps to ensure that no matter what company you are researching or comparing your own information to, it is easily understood and the formats lend themselves to comparative analysis.

Now we take all this information and we overlay it onto the characteristics of your CPA.

  1. You want a CPA who sets their own internal and external biases and opinions aside
  2. They have an inner drive to continue growing, expanding, updating their accounting and financial acumen thus remaining relevant in every sense of the word as it applies in this context
  3. They are consistent in the way in which they work with you
    1. in the presentation of your documentation
    2. in the manner in which they personally convey that information as they walk through it with you
  4. All of this culminates with your CPAs ability to take you, utilizing what has been prepared and delivered to you, through a comparison of other companies and easily show you where you stand in that comparison.

Conclusion

Basically, your accounting information and your CPA hold the same characteristics that ultimately lead to your financial success with you having all the information you need to make sound business decisions.

Together, you and your CPA are partners and your ability to be a team is invaluable to how you both move forward as your company’s sustainability evolves and strengthens.

Remember, the qualitative commonalities between accounting and your CPA is:

  1. Reliability
  2. Relevancy
  3. Consistency
  4. Comparability

What you need to know…About Common Errors with Deductions Part Two

It important when dealing with the IRS to make every effort to lower your tax burden, however, you must stay within the guidelines that are laid out in the tax laws of your state and the United States Statutes. Some taxpayers are missing some of the deductions due to them. Research has shown that the biggest mistake they make when completing their return is their social security number. The tax laws are complicated and there are so many deductions, it makes your head spin.  Here is Part Two of some commonly overlooked deductions:

Child Care Credit: The IRS provides tax benefits in the form of a credit for child care expenses incurred by taxpayers deemed to be gainfully employed. A credit is so much better than a deduction; it reduces your tax bill dollar for dollar. So missing one is even more painful than missing a deduction that simply reduces the amount of income that’s subject to tax.   You can qualify  for a tax credit worth between 20% and 35% of what you pay for child care while you work. But if your employer offers a child care reimbursement account – which allows you to pay fort the child care with pre-tax dollars – that might be a better deal. If you qualify for a 20% credit but are in the 25% tax bracket, for example, the reimbursement plan is the way to go. (In any case, only expenses for the care of children under age 13 count.)  You can’t double dip. Expenses paid through a plan can’t also be used to generate the tax credit. But get this: Although only $5,000 in expenses can be paid through a tax–favored reimbursement account, up to $6,000 for the care of two or more children can qualify for the credit. So, if you run the maximum through a plan at work but spend even more for work-related child care, you can claim the credit on as much as $1,000 of additional expenses. That would cut your tax bill by at least $200.

Estate Tax on Income of a Deceased person:  This sounds complicated, but it can save you a lot of money if you inherited an IRA from someone whose estate was big enough to be subject to the federal estate tax. Basically, you get an income-tax deduction for the amount of estate tax paid on the IRA assets you received. Let’s say you inherited a $100,000 IRA, and the fact that the money was included in your benefactor’s estate added $45,000 to the estate-tax bill. You get to deduct that $45,000 on your tax returns as you withdraw the money from the IRA. If you withdraw $50,000 in one year, for example, you get to claim a $22,5000 itemized deduction on Schedule A. That would save you $6,300 in the 28% bracket.

Refinancing Points:  When you buy a house, you get to deduct in one fell swoop the points paid to get your mortgage. When you refinance, though, you have to deduct the points on the new loan over the life of that loan. That means you can deduct 1/30th of the points a year if it’s a 30-year mortgage. That’s $33 a year for each $1,000 of points you paid, not much, maybe, but don’t throw it away.  Even more important, in the year you pay off the loan—because you sell the house or refinance again, you get to deduct all as-yet-undeducted points. There’s one exception to this sweet rule; If you refinance a refinanced loan with the same lender, you add the points paid on the latest deal to the leftovers from the previous refinancing, and deduct that amount gradually over the life of the new loan.

Home Buyer Credit: Most people think this credit expired in 2010, and it did for most homeowners. But, there’s a special rule for members of the uniformed armed services., the foreign service or the intelligence community who were on extended duty outside of the United States at least 90 days during the period after December 31, 2008 and ending before May 1, 2010.  If you qualify and you bought a home before May 1, 2011, you may qualify for a tax credit worth $8,000.

What you need to know… About Common Errors with Deductions”

It important when dealing with the IRS to make every effort to lower your tax burden, however, you must stay within the guidelines that are laid out in the tax laws of your state and the United States Statutes. Some taxpayers are missing some of the deductions due to them. Research has shown that the biggest mistake they make when completing their return is their social security number. The tax laws are complicated and there are so many deductions, it makes your head spin.  Here are some commonly overlooked deductions:

State Sales Tax is deductible and especially welcome in the states with no state income tax. You must chose to deduct the state income tax or the sales tax. You cannot do both. There is an IRS table and calculator to figure your deduction, at their website. This is especially helpful when you have large purchases during the year such as car, major remodeling along with all the new appliances, boat etc.

Reinvested Dividends – check with the mutual fund company to determine your taxable capital gain changes.

Out of Pocket Charitable Contributions can add up quickly. Keep your receipts from donating foods to charity, or ingredients to a fundraising event raising funds for charity.

Student Loan Interest paid by Parents The IRS treats the payback money from parents as a gift to the child and you may deduct up to $2,500 of a qualified student loan interest paid by parents. All of the following must apply for this deduction: You paid interest on a qualified student loan in the tax year 2011. You are legally obligated to pay interest on a qualified student loan. Your filing status is not married filing separately. Your modified adjusted gross income is less than a specified amount, which is set annually. You and your spouse, if filing jointly, cannot be claimed as dependents on someone else’s return.

Job Hunting Expenses are deductible not to exceed 2% of your adjusted gross income. If you are looking for the same kind of job you had before being laid off, you can deduct job-searching costs as a miscellaneous expenses on your itemized tax return. The allowable deductions are food, lodging, transportation if search takes you away from home overnight, cab fares, employment agency fees, costs of printing resumes, business cards, postage and advertising. You must itemize to get this deduction. These expenses are deductible even if you do not find employment.

Cost of Moving for your first job is deductible if the move is more than 50 miles away from home. The deduction includes the cost of getting you and your household goods to the new location. If you drive your own car deduct your mileage as well. If you are a member of the armed forces and your move was due to a military order and permanent change of station, you do not have to satisfy the “distance or time tests.” You must use Form 3903 to figure your moving expense deduction. You can deduct your un-reimbursed moving expenses.

Military reservists’ travel expenses are deductible when traveling more than 100 miles away from home for meetings and drills. You may deduct one half of meals and lodging. You are not required to itemize with this deduction.

New Deduction for Medicare Premiums is the latest deduction of interest to sole proprietors; partners, limited liability company members and S corporation shareholders can deduct qualified health insurance premiums paid to cover themselves and family members. This is the so-called self-employed health insurance deduction, which includes Medicare Part B premiums. As a bonus, you can subtract your self-employed health insurance premiums (the amount claimed on Line 29 of Form 1040) from the self-employment income when calculating your self-employment tax bill.

What you need to know… About Buying Discounted Mortgages

Mortgages, also known as notes or trust deeds have a category called ‘discounted’ mortgages.   Discounted mortgages are bought for a variety of investment reasons.  They can be held as long term investments or resold to other investors for immediate profit.  Even in today’s market discounted mortgages are held as safe and secure future profits. It may seem impossible to see the words ‘safe’, ‘secure’, and ‘profits’ when reading about a subject matter pertaining to mortgages, but be aware that investing is still taking place and people are still making profits.  The most important thing to know as you continue reading this article is that seeking out the advice of your CPA before making any investment decision is still the best advice anyone can provide you.

This article will only be addressing two key components of buying discounted mortgages.  For more in depth coverage speak with your mortgager, CPA, bank, real estate professionals, and further investigate the possibilities through the Internet How to Buy Discounted Mortgages

If you want to buy discounted mortgages the first real step is to educate yourself and network your way to success.  Make friends with real estate professionals.  Begin by cultivating a mortgage garden of real estate agents and brokers.  Since there is no ready-made market for discounted mortgages, the first person a mortgage holder would think to call is someone in the real estate business.  By making friends with several real estate professionals and letting them know of your interest in purchasing discounted mortgages, you’ll uncover a never ending supply of discounted mortgages.  One of the most important things you can do at this point in your venture is to initiate a process for identifying where your trust and your investment is best supported.

The next step is checking the credit history of the mortgagor before buying any discounted mortgage.  Carefully check the credit rating and credit history of the mortgagor as they are the person who will be responsible for making the payments on the mortgage.  Since the mortgagor has been making payments to the mortgage seller for some time, it is important to obtain verifiable proof of the timeliness of the payments.  If you have over $15, 000 of total investment capital, discounted mortgages should be a serious consideration.  However, don’t invest more than 30% to 50% of your capital in mortgages, since your investments can be tied up from two to ten years.  Have your attorney (or an attorney) handle the mortgage transfer and record the mortgage at the courthouse, giving you a priority claim against most other subsequent loans or mortgages

After collecting all the information on your first potential purchase of a discounted mortgage, and prior to attaining an attorney, contact your tax professional and present them with the information you have collected.  This will require a tax discussion.  You should always consult with your tax professional prior to any investment.  They will apprise you of the tax laws and any timeframe constraints encompassing the purchasing of a discounted mortgage.  Your tax professional will assist you in determining whether this form of investment would produce a negative or positive affect on your tax structure and provide you with a preview regarding the process for filing your yearly tax return.  According to your individual situation your tax professional will be able to advise you and file your returns correctly.

 

 

What you need to know About IRA Retirement Accounts

There are two kinds of Individual Retirement Accounts. The first is a Traditional IRA, which is essentially a savings account with benefits of “tax deferral”. This means that you put your money into the account and don’t pay taxes until you begin your “retirement” and start to take the money out. Certain tax advantages include the ability to deduct your contributions now on your tax returns. Depending on your tax bracket, your accountant or investment advisor can give you good advice as to your particular circumstance, you may be able to deduct a portion of your deposits to these accounts, which is based on your adjusted gross income.

The main benefits of the Traditional IRA work best on funds that are pre-tax. This means income tax withdrawals for federal and state taxes have not yet been taken out. Many employers offer 401Ks. However, when you leave your employer you will need to put the money into a similar type of retirement account or your savings will be taxed at your current rate of taxation.  The 2012 allowable contributions are $5,000 and $6,000 for those over 50.

The Second kind is the Roth IRA. The main difference between the two is with the Roth your contributions are non-deductible, but have the power to grow tax-free.  The Roth enjoys the same allowable contributions as the Traditional version.

With the Traditional IRA, if you have earned income, you are eligible to contribute. Even is you don’t have earned income, you can still contribute if your spouse has earned income and you file your taxes as married filing jointly. You must stop making contributions at the age of 70.

With the Roth IRA, if you have earned income, or your spouse has earned income and you file your taxes as married filing jointly, you can contribute at any age as long as your modified gross income (MAGI) falls below or within certain limits.   The limits for 2012 for married filing jointly are Income less that $173,000 you can make full contribution. Income of $173,001 to $182, 999 you can make a partial contribution. With an income of more than $183,000, you cannot contribute.  For individuals it breaks out like this: Income less than $110,000 = full contribution. $110,001 to $124,999 = partial contribution. $125,00 + = no contribution.

Although funds can be distributed from an IRA at any time, there are limited circumstances when money can be distributed or withdrawn from the account without penalties. Unless an exception applies, money can typically be withdrawn penalty free as taxable income from an IRA once the owner reaches age 59 and one half. Additionally, non-Roth owners must begin taking distributions of at least the calculated minimum payments by April 1st of the year after reaching age 70 and one half.

Please seek the advice of your professional accountant and an investment specialist is determining your situation and the best way to maximize the benefit of these wonderful retirement plans.

What you need to know-About the IRS Tax Deadline

Since the federal income tax was instituted in 1913 with the passage of the Sixteenth Amendment to the Constitution the tax rates have fluctuated from 1% to 35% depending on your income. The Sixteenth Amendment was ratified on February 3, 1913 and it states, “The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” *

The Internal Revenue Service (IRS) has announced the deadline for 2012 has been extended to Tuesday, April 17, 2012 because the fifteenth falls on a Sunday and a District of Columbia holiday “Emancipation Day” falls on Monday the sixteenth. According to federal law District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have two extra days to file this year.

Taxpayers who file extensions will have until October 15, 2012 to file their returns, however, you must ask for an extension by April 17, 2012.  The best way to file your taxes is to obtain the services of an experienced Certified Public Accountant (CPA) who can find all the deductions you may be entitled to. Their knowledge of the tax laws and rules can work to your best advantage if you disclose everything you did in 2011, including job changes, unemployment earnings, interest paid, interest earned, mortgage refinance, new children and sales tax on major purchases. Your tax professional may be able to provide you with a questionnaire or a list of potential deductions that you can check off your items and the list may jog your memory on something you may have forgotten about. I like to keep a 13” x 15” manila envelope near where I pay my bills and sort my receipts and I just drop the receipt or check copy that I think may be deductible and let my CPA decide if it is a proper deduction. Be sure to write on the receipt or check copy the details of the purchase. When in doubt, ASK!

 

The IRS has answers to your questions at www.irs.gov and advises tax payers to make sure their preparer has a Preparer Tax Identification Number (PTIN), which must be renewed each year.

Be honest! Be thorough! Be on time!

*Direct Quote from “The Constitution of the United States of America”.

Research material IRS.gov and the Constitution.

What you need to know About the Tax Consequences of Bankruptcy

It’s probably impossible to know all the consequences to your tax bill when you have filed Chapter 7, 11, 12 or 13 bankruptcies. The most important thing to know is yes, there will be consequences. All debtors are required to file all applicable federal, state and local tax returns that become due after a bankruptcy case commences. Failure to file tax returns in a timely manner or obtain an extension can case a bankruptcy petition to be converted to another chapter or dismissed. In chapter 13 cases, the debtor must file all required tax returns for tax periods ending within four years of the filing of a bankruptcy petition. The bankruptcy filing creates a “Bankruptcy Estate”. In chapter 11 cases of individuals, wages and income from self-employment earned during the bankruptcy case are property of the estate and must be reported on the bankruptcy estate’s tax return. The bankruptcy estate generally consists of all the assets of the person or entity filing the bankruptcy petition. It is a separate tax entity under chapter 7 & 11.

If you receive a 1099-C from any of your debtors from a bankruptcy discharge a taxpayer needs to file Form 982 to tell the IRS that this debt was included in your bankruptcy and should be exempted from taxation. Most tax debts will not be discharged in a bankruptcy, meaning after your case is over, and you will still owe any back taxes that may be due. The IRS will continue to accrue penalties and interest on your tax debt through your bankruptcy proceedings, so likely at the end when you are ready to settle with the IRS, your tax debt will be higher. Tax debts that are less than three years old cannot be included in bankruptcy. You must have filed tax returns properly for the previous four years before filing bankruptcy.

Tax refunds are considered income in the bankruptcy and in Chapter 7 cases they will be relinquished to the court. After chapter 7 cases are finalized, all you future tax returns are yours to keep and use as you see fit. Chapter 13 filers must usually pledge part or all of their tax refunds toward creditor repayment. After chapter 13 is completed, usually after three to five years, all future tax refunds belong to the debtor unless he owes newer taxes or defaulted on student loans. The bankruptcy estate is considered a separate entity and the trustee or debtor-in-possession is responsible for preparing and filing the estate’s tax returns and paying its taxes. The debtor remains responsible for filing their own returns and paying taxes on income that does not belong to the estate. The estate must obtain an employer identification number (EIN) for use in this regard. Anyone considering filing bankruptcy should obtain a copy of the IRS Publication 908 Bankruptcy Tax Guide to help you in your decision making and understanding your tax implications.

 

You should always consult with your tax professional to determine if this could pertain to your individual situation and your tax professional would be able to advise you and file your returns correctly.

*Research Material: IRS Publication 908 (Rev.Mar.09) “Bankruptcy Tax Guide”